Unchecked inflation can hurt real economy prospects: RBI report

Early signs of spillover from high food prices; pvt consumption back

- MANOJIT SAHA

Following retail inflation spike in October, the Reserve Bank of India's (RBI's) state of the economy report warned that rising prices, if unchecked, would undermine prospects of the real economy while cautioning on the spillover effect of rising food prices on headline and said uptick in core inflation is a 'worry'.

The RBI Bulletin for November sounded optimistic on growth and said private consumption was back to being the driver of domestic demand and promising rabi crop prospects augured well for farm income and rural demand.

The October inflation figure—at 6.21 per cent—remained above the RBI's tolerance zone. Termed a "sticker shock" by the report, it reinforced the central bank's warnings against complacency following sub-target inflation outcomes in July and August.

"What is worrying is that apart from the sharp surge in the momentum of food prices, core inflation has edged up," the report, authored by RBI staffers, including Deputy Governor Michael Debabrata Patra, said.